Car rental company Avis Budget Group warned of "headwinds" in 2018 and adopted a poison pill to stymie an activist shareholder. Shares of rival Hertz Global Holdings fell with those of Avis.

Rental car shares skidded today after Avis Budget Group (CAR) adopted a poison pill rights plan, to block the activist demands of its largest shareholder, and warned that Avis expects "ongoing headwinds in 2018." Share of Avis are down 11% at $43.50, while those of arch-rival Hertz Global Holdings (HTZ) are down 13% to $21.35.

It's the second time that Avis has adopted a poison pill plan to stymie the New York-based hedge fund SRS Investment Management, which owns 15% of Avis shares and has derivatives worth another...

Rental car shares skidded today after Avis Budget Group (CAR) adopted a poison pill rights plan, to block the activist demands of its largest shareholder, and warned that Avis expects "ongoing headwinds in 2018." Share of Avis are down 11% at $43.50, while those of arch-rival Hertz Global Holdings (HTZ) are down 13% to $21.35.

It's the second time that Avis has adopted a poison pill plan to stymie the New York-based hedge fund SRS Investment Management, which owns 15% of Avis shares and has derivatives worth another 16% of Avis' shares outstanding. In January 2017, the car rental company adopted a similar poison pill plan -- which would trigger a highly dilutive share issuance, in the face of an unfriendly takeover attempt. Avis put aside last year's poison pill in May 2017, when SRS agreed to work with the rental company's management, under an agreement that expired this week. In announcing the new poison pill on Monday, Avis said it had offered SRS another board seat, in addition to the two that SRS already controls, but claims that the activist fund demanded the ability to further increase its voting power, as well as a veto over appointments to Avis's board and management.

Investors may be unhappy that the new poison pill limits the activist firm's leverage over Avis management. Today, the Parsippany, NJ-base car renter preannounced preliminary results for the just-ended 2017 year. Those numbers were roughly in line with expectations. Revenues for 2017 were $8.85 billion and cash flows were between $730 million and $740 million (after some company adjustments). Avis chief executive Larry De Shon defended the company's efforts to cut costs, in the face of "nearly $300 million of unexpected pricing and fleet cost challenges."

"Despite industry challenges," said De Shon, in today's announcement, "we believe there are considerable opportunities to leverage technology to further lower our cost structure." As noted, however, he warned of continued headwinds in 2018, including "rising interest rates and other items."

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Avis's glum industry view has likely dismayed stockholders at Hertz and prompted today's industry selloff. Avis will report its actual results for 2017 on February 21, with a conference call the next day that will discuss its outlook.

Update: This article has been corrected to eliminate its mention of pre-tax earnings, which we calculated in a way different from the company's.